NEW YORK, Feb 21 (Reuters) - U.S. stocks fell on Thursday,
on track for the biggest two-day decline since November, as weak
data suggested expectations for economic growth were overly
optimistic.

The two-day decline was stocks' first sustained pullback
this year. The S&P 500 is up 5.4 percent so far this year and
risen for seven straight weeks, putting it near five-year highs.

In the latest economic data, initial claims for unemployment
benefits rose more than expected last week while the Federal
Reserve Bank of Philadelphia said its index of business
conditions in the U.S. mid-Atlantic region fell in February to
minus 12.5, the lowest in eight months.

"The Philly Fed report was troublingly weak, and adds to
concerns about whether growth will remain up," said Brad
Sorensen, director of market and sector analysis at Charles
Schwab in Denver. "The only growth we're seeing is sluggish."

The S&P 500 and Nasdaq posted the worst daily decline of the
year on Wednesday after comments from the Federal Reserve
sparked concerns the central bank may rein in its economic
stimulus measures.

"The upside momentum in markets appears to be coming to an
end as we consolidate recent gains," said Adam Sarhan, chief
executive at Sarhan Capital in New York. "If the S&P breaks
under its 50-day moving average, something more serious could be
in store."

The benchmark index would need to fall 1.9 percent to reach
that level of 1,473.58.

Other reports showed consumer prices were flat in January
while existing-home sales edged higher and left inventory of
homes at the lowest level in 13 years.

Wal-Mart Stores Inc gained 3.1 percent to $71.34 and
helped limit losses on the Dow after reporting earnings that
beat expectations, though early February sales were sluggish.

The Dow Jones industrial average was down 53.07
points, or 0.38 percent, at 13,874.47. The Standard & Poor's 500
Index was down 8.26 points, or 0.55 percent, at 1,503.69.
The Nasdaq Composite Index was down 24.71 points, or
0.78 percent, at 3,139.70.

The benchmark S&P index has dropped 1.8 percent over the
past two sessions, the biggest two-day decline since November.

Wall Street will soon face another test with the upcoming
debate in Washington over the automatic, across-the-board
spending cuts put in place as part of a larger congressional
budget fight. Those cuts, due to kick in March 1 unless
lawmakers agree on an alternative, are expected to depress
economic growth.

In company news, Safeway Inc jumped 15 percent to
$23.12 and was the S&P's top percentage gainer after it reported
earnings that beat expectations.

According to Thomson Reuters data through Thursday morning,
of the 427 companies in the S&P 500 that have reported results,
69.3 percent have exceeded analysts' expectations, compared with
a 62 percent average since 1994 and 65 percent over the past
four quarters.

Fourth-quarter earnings for S&P 500 companies are estimated
to have risen 5.9 percent, according to the data, above a 1.9
percent forecast at the start of the earnings season.

Berry Petroleum Co jumped 17 percent to $45.16 after
oil and gas producer Linn Energy LLC said it would buy
the company in an all-stock deal valued at $4.3 billion
including debt. Linn Energy shares advanced 2 percent to $37.34.

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